Page 21 - Finac1 Test 3 slides - 1. Property, Plant and Equipment

TEST 3 PREPARATION

Elements of cost
Elements of cost - Read IAS 16.16-18

• Recognition of costs in the carrying amount of a PPE

item ceases when the item is in the location and

condition necessary for it to be capable of operating in
the manner intended by management.

• Therefore, costs incurred in using or redeploying an

item are not included in the carrying amount of that

item. For example:

• (a) costs incurred while an item capable of operating in the
manner intended by management has yet to be brought into

use or is operated at less than full capacity;

• (b) initial operating losses, such as those incurred while
demand for the item's output builds up; and

• (c) costs of relocating or reorganising part or all of an entity's
operations.

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